Small Cap catch-up: Made, H&T, Kape and more

Made Tech (LON:MTEC) – an absolute ARR winner in the making

Monday’s results for the year to end May did not come as any surprise because they were well flagged a month ago.

This group, which is in its first year as a quoted company, is a top provider of digital, data and technology services to the UK public sector.

Its clients include the Home Office, DVLA, HMRC, the Ministry of Justice, the Department for International Trade and the Department of Education amongst scores of others. Just think of their ongoing spend.

The company reported a 120% rise in revenues to £29.3m (£13.3m) while adjusted pre-tax profits were a mega 387% better at £2.3m (£0.8m loss).

The current year has already started strongly with some £13.3m of new contracts secured while its annualised revenue run rate at 31 August 2022 was about £40m.

The £45m capitalised group had net cash of £12.3m at the year end.

CEO Rory MacDonald stated that:

“New contract wins, robust pipeline and record sales bookings underpin the Board’s confidence in the prospects for the business for FY23 and beyond. We have made strong operational and strategic progress, in our first year as a quoted company, and taken significant steps forward in the delivery of our mission to improve public services.”

The trio of analysts covering this group, at its broker Singer Capital Markets, rate its shares as a Buy with a price objective of 76p, more than twice the current price.

They are looking for £43.0m revenues for the current year to end May 2023, then up to £50.0m for 2024. Respective profits and earnings for those years are £3.4m then £4.1m, with earnings of 2.3p then 2.6p per share.

Remember the company came to the market at the end of September last year, at 122p a share, it was well oversubscribed, and valued at £180.7m on the first day of dealings.

In my view the shares, which are now just 26.75p, would appear very ready for a significant climb to the 40p/45p level soon.

This group, which has had a compound annual growth rate of 97% in the last four years, could well become an absolute ARR ‘winner in the making’.

(Profile 24.08.22 @ 34p set a Target Price of 45p)

H&T Group (LON:HAT) – bubbling share price

A couple of weeks ago I mentioned, when this pawnbroking group’s shares hit 479p, that they may well fall back to around the 420p level, at which point I indicated that I could follow-up my comments on the company.

Well, they dipped to a low of 415p on the first day of this month, before the bargain hunters came out again and took the market quickly out of stock.

Last night the group’s shares closed at 469.5p, after hitting 473p again.

At that price the house broker’s ‘fair value’ of 470p had been broken, while my personal view is that 500p is easily achievable.

So far, this column has had a wonderful run with the company’s shares since the initial Profile on the group in early July, then at just 332.5p. My first price goal was beaten within nine trading days – showing a very fast 20% gain.

The 44% gain was scored within six weeks, before the end August fall-back.

Who would have guessed that the shares of a pawnbroking company could be such a trader’s favourite?

Apart from any corporate news, we can only expect the next shareholder contact coming with the end of year Trading Update, possibly in January.

So, dealing activity may well slow down for a while, tempting profit-takers to act. At which point resourceful investors may well jump into a quick position if the shares ease back to say 430/440p before a run-up ahead of the Update.

It is the coming year that will see a big lift-up to profits of some £28.8m to end December 2023 against the estimated £18.7m for the current year, with earnings lifting from 36.5p E to 56.3p E per share. Even the dividend will shoot up from an estimated 3.7% this year to 5.5%.

It is the anticipation of such excellent results due, this year and next, that will keep the shares bubbling away.

(Profile 06.07.22 @ 332.5p set a Target Price of 400p*)

Kape Technologies (LON:KAPE) – heading to 400p?

Following the massive ExpressVPN acquisition late last year, this digital security and privacy software business enjoyed a strong first half to end June this year, with sales up 216.6% at $302.4m ($95.5m), of which $268.0m ($59.1m) were recurring revenues.

EBITDA was 209.7% better at $88.9m ($28.7m), with EBITDA earnings of 34.1c (9.0c) per share. Cash flow was 517% improved at $90.1m ($14.6m).

Kape expects to deliver on its growth targets, to focus on organic growth engines, as well as continue to execute on its successful in-organic strategy assessing selected M&A targets to accelerate that growth.

The group is now expected to generate revenues of between $610-624m and EBITDA of between $166-172m for the year to end December 2022.

There has been strong demand for the enlarged group’s privacy and security products, coming from new customer growth and from increased upselling within the group’s client lists.

Analyst Caspar Erskine at Singer Capital Markets rates the shares as a Buy, with a price objective of 450p.

He is looking for the next year to end December 2023 to show revenues of $688.3m and EBITDA of $192.6m, kicking adjusted pre-tax profits up from an estimated $126.5m for this year to $165.3m next year, hoisting earnings estimates from 31.8c to 41.3c per share.

On the back of these results the group’s shares lifted to 297p in reaction, a 37p increase on the day.

Then yesterday morning the company announced that it was handling an institutional and private investor Placing to raise between $110m to $200m, by way of the issue of new shares at 265p each, with the funds being used to enhance its capabilities to ‘accelerate its growth through acquisitions.’

Billionaire founder Teddy Sagi’s IOM-based Unikmind Ltd, with 53.7% of the equity, is taking up $110m worth at the price – I just love this guy and the way he handles his business – certainly never to be underestimated.

The shares fell 21.p to 272.5p on the back of the Placing news – at which price I reckon that they are an absolute knockout not to be missed.

(Profile 21.12.20 @ 172p set a Target Price of 215p*)

(Profile 01.11.21 @ 402.5p set a Target Price of 600p)

RBG Holdings (LON:RBGP) – a ‘lady to watch’

Yesterday’s announcement of this professional services group’s interims to end June showed ‘a solid performance delivered by its resilient business model.’

Nicola Foulston, CEO, stated that

“Overall, the Group has had a solid first six months which is reflected in our continued revenue and profit growth.Our diversified revenue model has proved to be resilient in these uncertain times. We have built a strong platform from which to deliver growth over the coming years. 

With consistent demand for all Group services, we are on track to meet our expectations for the full year.  While acknowledging the economic conditions continue to be volatile, we look forward to the next six months with optimism and are excited about the long-term prospects for the Group.”

James Tetley, analyst at Singer Capital Markets, gives the group’s shares a Buy tag, looking for 160p in the next year.

His estimate for the full year is for revenues to rise to £56.2m (£47.2m), while adjusted pre-tax profits could lift to £12.9m (£10.7m) and earnings of 10.8p (8.9p), with dividends of 5.90p (5.00p) per share.

Regular readers will already know that I rate Nicola Foulston as ‘a lady to watch’ and I now consider that her group’s shares, at just 86.5p, are an excellent tuckaway backed by a handsome yield.

(Profile 05.02.21 @ 80p set a Target Price of 100p*)

(Profile 17.08.22 @ 88.5p set a Target Price of 120p)

Ten Entertainment Group (LON:TEG) – great value ahead of figures

The bowling and family entertainment centres operator should be reporting its interim to 26 June in a week’s time.

With some 47 such centres the company has enjoyed a good first half, certainly performing better than the second half of last year.

CEO Graham Blackwell claims his group to having been outperforming the leisure and hospitality sector, while expecting to deliver full-year results better than market expectations.

He has been coping with inflationary pressures by offset pricing, while a fixed price energy deal will help ongoing margins.

Analyst Anna Barnfather, at its brokers Liberum Capital, rates the shares as undervalued, with a price objective of 370p.

For the full year she is going for sales rising 70% to £114.4m, while pre-tax profits could well lift up more than seven-fold to £23.0m (£3.1m), hoisting earnings up from 3.9p to 25.4p per share.

She is looking for even more strength in sales and profits growth in 2023 and 2024.

Over at Peel Hunt, their analyst Douglas Jack has a Buy out on the shares, with his aim being 400p a share, impressed with the group’s high margins and underlying trading strength.

I look forward to next week’s half-timers and the accompanying statement.

The shares, which were up to 285p earlier this year, at the current 188p look to be great value.

(Profile 02.10.20 @ 135p set a Target Price of 170p*)

And Finally……..

Just what does a £900m capitalised investment group want with a stake of 1.54m shares (4.57%) in the Guernsey-based Worsley Investors (LON:WINV), which is valued for its total equity at only £8.3m? Are there Antipodean connections at work here? Perhaps Blake Nixon might mention something at the CI company’s AGM on Thursday of next week. Worsley shares are just 24.5p.

After the announcement of the shock retirement of Stephen Wicks at the end of this month, the ghastly Trading Update and the news that the Inland Homes (LON:INL) ‘brownfields’ property group was calling in Lazards to do a ‘Strategic Review’ – the group’s shares collapsed to a low of 17.45p. Last Friday three of the group’s directors bought more shares. They closed last night at 23.25p – which has to be less than a third of their real value. Is a bid in the offing in due course?

I note that, following its recent interim results statements, i3 Energy (LON:I3E) is being called up by two leading brokers. They consider that the independent oil and gas company’s shares have the potential to more than double from last night’s closing price of 24.65p. They have a 49p price objective out on the shares.

Vin Murria is like a terrier gnawing away at the advertising group M&C Saatchi (LON:SAA). With her personal stake in the company, together with that of AdvancedAdvT, she has a powerful 22% block against NextFifteen winning the day in bid terms. If she does not win with the ADVT bid, then be prepared for her to bring about some considerable agitation to shake up the existing Board of the media company, snapping determinedly at their heels. Saatchi shares are now 153.50p.

(Asterisks * denote that Target Prices have been achieved since Profile publication)